On August 29, 2024, the American Sustainable Business Council (ASBC), acting on behalf of members including Etho Capital and Sphere, sued Texas for violating the free speech and association rights protected under the First and Fourteenth Amendments of the United States Constitution through the implementation of SB-13—a law that penalizes private companies that choose not to make risky investments in unsustainable sources of energy.

SB-13, signed into law in 2021, is an anti-business law that has cost the state nearly $700 million in lost economic activity and 3,000 lost full-time jobs, and which the Texas Association of Business says has already caused $270 million in increased costs for banking and financial services. It bars state pension plans and the state’s permanent school fund from investing in–and requires them to divest from– financial companies that “boycott” energy companies. This unconstitutional attack on business is bad for taxpayers, workers, business owners, and pensions. 

That’s why the American Sustainable Business Council (ASBC),  a business group that includes members that want to offer their services in Texas like Etho Capital and Sphere, is challenging the law in court, representedby Democracy Forward, Emery Celli Brinckerhoff Abady Ward & Maazel LLP and Guerrero & Whittle PLLC.

The lawsuit filed in The Western District of Texas’ Austin Division argues that SB-13 discriminates against companies that use environmental, social, and governance (“ESG”) metrics in their investing and business practices. The law, moreover, has both a negative impact on businesses that use ESG metrics and on everyday Texans. The lawsuit highlights the substantial financial harms SB-13 has had on Texas taxpayers, workers, business owners, and pensioners.

The case is ASBC v. Hegar and plaintiffs are requesting a federal court to declare SB-13 unconstitutional and unenforceable.